THE MEDIA BUSINESS; U.S. Sues MCI and News Corp. on Primestar

The Justice Department filed a civil antitrust lawsuit today to block a $1.1 billion plan by a venture of the MCI Communications Corporation and the News Corporation to sell direct-broadcast satellite assets to Primestar Partners L.P.

The deal would have given the nation's largest cable television companies, which together own Primestar, a major share of the emerging business that beams television programs from satellites directly to pizza-sized dishes at people's homes. The deal was opposed by a coalition of consumer groups led by Consumers Union and by rival satellite broadcasters.

''Direct Broadcast Satellite presents the first real threat to the cable monopoly,'' said Joel I. Klein, the Assistant Attorney General who is head of the antitrust division at the Justice Department. ''In most cases, we have a choice of only one cable company and we are seeing constantly rising prices. Unless this acquisition is blocked, consumers will be denied the benefits of competition -- lower prices, more innovation, and better services and quality.''

The suit, filed in United States District Court here, would block Primestar from acquiring the direct-broadcast satellite assets of the MCI/News venture known as American Sky Broadcasting.

The suit said the deal would allow the cable companies that own Primestar -- Tele-Communications Inc., Time Warner Inc., the Comcast Corporation, Cox Enterprises and US West/Mediaone -- to protect their monopolies and keep out new competitors using the satellite technology.

The move was applauded by Gene Kimmelman, co-director of the Washington office of Consumers Union. He called it an important first step in trying to make satellite providers more competitive with cable. If the Government had not blocked the deal, he said, the cable companies that own Primestar ''would have dominance in the satellite industry, with no incentive'' to cut the price of satellite broadcasting so it might take customers away from its own or other cable operators.

The Federal Communications Commission is also reviewing the deal.

Rival direct-satellite broadcasters, like DirecTV/United States Satellite Broadcasting and the Echostar Communications Corporation, worried that Rupert Murdoch, chairman of the News Corporation, would not sell his cable networks to them if he was allowed to obtain an interest in Primestar.

So far, the direct-broadcast satellite industry has more than 5 million subscribers, while cable television has about 67 million.